Keystone Northeast Inc v. Keystone Retaining Wall Systems Inc et al

Filing 147

OPINION AND ORDER, Plaintiff shall be entitled to a judgment of $725,775 in past damages under the three Transfer Agreements; Plaintiff shall be entitled to prejudgment interest in the amount of $203,140. The Court r einstates the 1999 Gagne Transfer Agreement, the 2000 Jandris Transfer Agreement, and the 2000 Hi-Way Transfer Agreement, effective immediately. Defendants are ordered to make payments due under these agreements effective March 1, 2015. Plaintiffs remaining claims are dismissed with prejudice. Signed by Honorable Bruce Howe Hendricks on 3/31/2015. (gpre, )

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
GREENVILLE DIVISION

Keystone Northeast, Inc., f/k/a Pavers ) Civil Action No.: 6:12-cv-720-BHH
Plus GSP, Inc., assignee of Madawaska )
Brick and Block Corp.,
)
)
Plaintiff, )
Opinion and Order
vs.
)
)
Keystone Retaining Wall Systems, LLC,
)
f/k/a Keystone Retaining Wall Systems
)
Inc., a division and wholly owned
)
subsidiary of Contech Construction
)
Products, Inc.,
)
)
Defendants. )
_________________________________ )

This matter is before the Court following entry of the Court’s Orders dated March
17, 2015 (ECF No. 131) and March 25, 2015 (ECF No. 141) and a hearing conducted
on March 26, 2015 regarding the need for a jury to determine damages. Based on the
submissions underlying these orders and the matters submitted and considered at the
hearing, the Court enters the following Order.
The Court has concluded that Defendants breached their obligation to make
payments to Plaintiff under the Transfer Agreements. As to damages for the breach,
the express terms of those Transfer Agreements required Defendants to pay to Plaintiff
fees “based on sales of units manufactured” in the transferred territories. See, e.g.,

1

Gagne Transfer Agreement, § 3; Jandris Transfer Agreement, § 4; Hiway Transfer
Agreement, § 3.1
Without waiving their right to appeal this Court’s underlying rulings, the parties do
not dispute the square footage sales from January 1, 2009, to February 28, 2015, for
products sold by Gagne, Jandris and Hiway. For retaining wall products not identified
on the respective Schedules C of the Transfer Agreement, the Court has, consistent
with the parties’ course of performance, used a 50% allocation of the royalty charged by
Keystone for the respective products not identified on Exhibits C to the Transfer
Agreement. The Court has not included non-retaining wall products, such as pavers or
edgers, as part of the damages. Based on the above, the annual fees are:
a. Gagne Transfer Agreement:
2009

2010

2011

2012

2013

2014

2015

$42,345 $51,325

$35,379

$35,743

$47,643

$34,29
5

($90)2

GAGNE
TOTAL
$246,641

b. Jandris Transfer Agreement:
2009

2010

2011

2012

2013

2014

2015

$39,139 $37,816

$41,099

$28,701

$17,722

$23,06
2

$121

2013

2014

2015

JANDRIS
TOTAL
$187,660

c. Hiway Transfer Agreement
2009

2010

2011

2012

HIWAY
TOTAL

1

The Transfer Agreements also each contain an “Exhibit C” setting forth the allocation of fees
between the parties for the specific products.
2

The 2015 sales for Gagne resulted in a negative number due to return of products previously
sold.

2

$35,545 $42,787

$31,136

$47,151

$75,376

$57,79
8

$1,68
1

$291,474

The calculations above result in a total of $725,775 in past damages under the
three Transfer Agreements.
Furthermore, the Court concludes that pre-judgment interest should apply to
these damages. Because the Transfer Agreements lack a choice of law provision, the
Court will apply South Carolina substantive law, including its law on pre-judgment
interest. South Carolina Code § 34-31-20 applies a rate of 8.75% to the fees under
Exhibit C, as they “capable of being reduced to certainty based on a mathematical
calculation previously agreed to by the parties.” Dixie Bell, Inc. v. Redd, 376 S.C. 361,
370, 656 S.E.2d 765, 769 (Ct. App. 2007) (citations omitted). To arrive at the amount of
interest for each year, the Court has adopted the “South Carolina interest factor”
submitted by Plaintiff’s expert in his most recent report.3 The calculation of interest is
set forth below:

3

Although the Court elects to use the expert’s interest factor, the Court declines to use the
expert’s calculation of proposed lost royalties. The parties agreed that fees would only be due
“based on sales of units manufactured” in the transferred territories. See, e.g., Gagne Transfer
Agreement, § 3; Jandris Transfer Agreement, § 4; Hiway Transfer Agreement, § 3.

3

Year

Total Fees

SC
Factor

2009

$117,029

Interest Interest
Calculation
0.4949
$57,918

2010

$131,928

0.4145

$54,684

2011

$107,614

0.3269

$35,179

2012

$111,595

0.2393

$26,705

2013

$140,741

0.1514

$21,308

2014

$115,155

0.06364

$7,328

2015

$1,712

0.01008

$17

TOTAL
INTEREST

$203,140

Defendants argued that future damages are speculative because Plaintiff’s future
damages are largely dependent upon a continuing relationship between KRWS and
Gagne, Hi-Way, and Jandris – the duration and details of which cannot be forecast to a
reasonable certainty.4 Defendants argued that specific performance, vis-à-vis
reinstatement of Plaintiff’s Transfer Agreements, would be a more appropriate remedy.
The Court agrees that there are considerable uncertainties and contingencies
concerning the parties’ obligations going forward that would involve improper guesswork
and speculation by the jury. As a result, the Court has concluded that the more
appropriate remedy is to order specific performance of the Transfer Agreements. The
Court will, therefore, order Defendants to make payments to Plaintiff based on sales of

4

Defendants filed a Motion to Exclude the Testimony of John R. Markel (ECF No. 133) pursuant
to Rule 702 of the Federal Rules of Evidence the principles set forth in Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579 (1993). Said Motion was denied by the Court’s March 25, 2015
Order (ECF No. 141).

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units manufactured in the transferred territories by Gagne, Jandris, and Hiway for the
products set forth in Exhibit C to each agreement and according to the specific fee
schedule set forth in those Exhibits C. Defendants are also to make payments for new
retaining wall products using the same 50% allocation described above. Defendants
are not obligated to make payments on non-retaining wall products, such as pavers or
edgers.
At the hearing on March 26, 2015, the parties reserved their respective rights to
appeal as to various issues and prior rulings of the Court. The Court has considered
the parties’ arguments but stands by its rulings and this Order, understanding that each
party has the right to appeal these issues and rulings or any other appealable matter.
The parties’ submission of proposed orders as requested by the Court is without
prejudice to these rights to appeal.
As to the judgment of past damages, Defendants may post a bond or other
adequate security to stay enforcement of the judgment if appeal is taken. As to the
judgment ordering continuing payments according to the Transfer Agreements, in the
event an appeal is taken, Defendants are ordered to pay these amounts into an escrow
account maintained by a federally-insured institution and to maintain adequate
documentation to explain and confirm the amounts deposited.
WHEREFORE, the Court ORDERS:
1. Plaintiff shall be entitled to a judgment of $725,775 in past damages under
the three Transfer Agreements;
2. Plaintiff shall be entitled to prejudgment interest in the amount of $203,140.

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3. The Court reinstates the 1999 Gagne Transfer Agreement, the 2000 Jandris
Transfer Agreement, and the 2000 Hi-Way Transfer Agreement, effective
immediately. Defendants are ordered to make payments due under these
agreements effective March 1, 2015.
4. Plaintiff’s remaining claims are dismissed with prejudice.
5. The Parties shall bear their own costs.
IT IS SO ORDERED.
/s/ Bruce Howe Hendricks
United States District Judge
March 31, 2015
Greenville, South Carolina

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